Edexcel A-level Economics Theme 3 Test
Questions and Answers A+ grade
Backwards vertical integration -ANSWER-a joining together into one firm of two or more
firms where the purchaser merges with/takes over one or more of its suppliers
Conglomerate integration -ANSWER-a joining together into one firm of two or more
firms producing unrelated products
Demerger -ANSWER-when a firm splits into two or more independent businesses
Divorce of ownership from control -ANSWER-when managers and directors of a
business are different from the owners of a business (the shareholders)
Forward vertical integration -ANSWER-a joining together into one firm of two or more
firms where the supplier merges with/takes over one or more of its buyers
Horizontal integration -ANSWER-a joining together of two firms in the same industry at
the same stage of production
Niche market -ANSWER-a small segment of a larger market
Merger/integration -ANSWER-the joining together of two or more firms under common
ownership
Not-for-profit organisations -ANSWER-organisations that do not aim to make a profit;
rather, they use any profit or surplus they generate to support their aims (eg. a charity)
Organic or internal growth -ANSWER-a firm increasing its size through investment in
capital equipment/an increased labour force
Private sector organisations -ANSWER-organisations owned by individuals or
companies rather than the state
Public sector organisations -ANSWER-organisations owned and controlled by the state
Synergy -ANSWER-when two or more activities/firms put together can lead to greater
outcomes than the sum of the individual parts
Vertical integration -ANSWER-a joining together into one firm of two or more firms in the
same industry at different stages of production
Average revenue -ANSWER-the average receipts per unit sold // TR÷Q
, Marginal revenue -ANSWER-the addition to total revenue of an extra unit sold //
ΔTR÷ΔQ
Total revenue -ANSWER-the total amount of money received from the sale of any given
quantity of output // AR*Q
Average product -ANSWER-the quantity of output per unit of factor input // total
product÷level of output
Law of diminishing marginal returns -ANSWER-if increasing quantities of a variable
input are combined with a fixed input, eventually the marginal product and then the
average product of that variable input will decline.
Long run -ANSWER-the period of time when all factors of production can vary, as does
the number of firms in the market, but the level of technology remains constant
Marginal product -ANSWER-the addition to output produced by an extra unit of input //
Δtotal output÷Δlevel of inputs
Returns to scale -ANSWER-the change in percentage output resulting from a
percentage change in all the factors of production
Short run -ANSWER-the period of time in which at least one factor of production is
fixed, as is the number of firms in the market
Total product -ANSWER-the quantity of output measured in physical units produced by
a given number of inputs over a period of time
Very long run -ANSWER-the period of time in which all factors are variable, as is the
number of firms in the market, and the state of technology is variable
Average cost -ANSWER-the average cost of production per unit // AVC+AFC
Average fixed cost -ANSWER-TFC÷Q
Average variable cost -ANSWER-TVC÷Q
Diseconomies of scale -ANSWER-a rise in the long run average costs of a firm as
production increases
Economic cost -ANSWER-the opportunity cost of an input into the production process
Economies of scale -ANSWER-a fall in long run average costs of production as output
rises
Questions and Answers A+ grade
Backwards vertical integration -ANSWER-a joining together into one firm of two or more
firms where the purchaser merges with/takes over one or more of its suppliers
Conglomerate integration -ANSWER-a joining together into one firm of two or more
firms producing unrelated products
Demerger -ANSWER-when a firm splits into two or more independent businesses
Divorce of ownership from control -ANSWER-when managers and directors of a
business are different from the owners of a business (the shareholders)
Forward vertical integration -ANSWER-a joining together into one firm of two or more
firms where the supplier merges with/takes over one or more of its buyers
Horizontal integration -ANSWER-a joining together of two firms in the same industry at
the same stage of production
Niche market -ANSWER-a small segment of a larger market
Merger/integration -ANSWER-the joining together of two or more firms under common
ownership
Not-for-profit organisations -ANSWER-organisations that do not aim to make a profit;
rather, they use any profit or surplus they generate to support their aims (eg. a charity)
Organic or internal growth -ANSWER-a firm increasing its size through investment in
capital equipment/an increased labour force
Private sector organisations -ANSWER-organisations owned by individuals or
companies rather than the state
Public sector organisations -ANSWER-organisations owned and controlled by the state
Synergy -ANSWER-when two or more activities/firms put together can lead to greater
outcomes than the sum of the individual parts
Vertical integration -ANSWER-a joining together into one firm of two or more firms in the
same industry at different stages of production
Average revenue -ANSWER-the average receipts per unit sold // TR÷Q
, Marginal revenue -ANSWER-the addition to total revenue of an extra unit sold //
ΔTR÷ΔQ
Total revenue -ANSWER-the total amount of money received from the sale of any given
quantity of output // AR*Q
Average product -ANSWER-the quantity of output per unit of factor input // total
product÷level of output
Law of diminishing marginal returns -ANSWER-if increasing quantities of a variable
input are combined with a fixed input, eventually the marginal product and then the
average product of that variable input will decline.
Long run -ANSWER-the period of time when all factors of production can vary, as does
the number of firms in the market, but the level of technology remains constant
Marginal product -ANSWER-the addition to output produced by an extra unit of input //
Δtotal output÷Δlevel of inputs
Returns to scale -ANSWER-the change in percentage output resulting from a
percentage change in all the factors of production
Short run -ANSWER-the period of time in which at least one factor of production is
fixed, as is the number of firms in the market
Total product -ANSWER-the quantity of output measured in physical units produced by
a given number of inputs over a period of time
Very long run -ANSWER-the period of time in which all factors are variable, as is the
number of firms in the market, and the state of technology is variable
Average cost -ANSWER-the average cost of production per unit // AVC+AFC
Average fixed cost -ANSWER-TFC÷Q
Average variable cost -ANSWER-TVC÷Q
Diseconomies of scale -ANSWER-a rise in the long run average costs of a firm as
production increases
Economic cost -ANSWER-the opportunity cost of an input into the production process
Economies of scale -ANSWER-a fall in long run average costs of production as output
rises
